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Keynesian economics is defined as:

increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression.

Do all modern economies adopt a Keynesian fiscal stance during significant economic downturns? Or have some demonstrated that they will not increase government spending at all during downturns?

Notes:

  • To make the question less ambiguous, please assume a country is 'Keynesian' if government spending was intentionally increased by at least 2.5% during a downturn of at least 1% at any point in the last 50 years (and 'somewhat Keynesian' if government spending increased by 1.5% during a downturn of at least 1%).

  • Example: According to this, Australia would be 'Keynesian', since it increased spending by 4% in response to a 1.6% downturn in 2008/9.

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    $\begingroup$ 1) If a country has welfare state programmes, they automatically increase during a recession. 2) There is a difference between countries that control their currency, vs. those that borrow in foreign currencies. Countries that borrow in a foreign currency can have an external crisis that forces them to cut spending in a crisis. They are “non-Keynesian” involuntarily. $\endgroup$ – Brian Romanchuk Feb 12 at 12:30
  • $\begingroup$ @BrianRomanchuk 1) That's true, but note "intentionally", so the increase in govt. spending must at least in significant part be non-autonomous. 2) Also true, but an inability to implement Keynesian ideas during one downturn doesn't imply a country is against Keynesian ideas and wouldn't implement them if they could, or didn't implement them during other downturns (hence to half-century timeframe in the question - enough to account for several downturns) $\endgroup$ – stevec Feb 12 at 12:46
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    $\begingroup$ This would be difficult to verify because a person would have to first examine when individual countries had recessions. For example, your Australian example is incorrect because most economists do not believe Australia had recession in 2009 (e.g. see this bbc article bbc.com/news/business-53994318#) Hence, already your example of Australia violates your own definition. This being said I would be extremely surprised if there would be any country in last 50y that would not at least once increase spending by modest 2.5% during recession but examining that would take days. $\endgroup$ – 1muflon1 Feb 12 at 12:46
  • $\begingroup$ @1muflon1 A less strict way to see the question: do any countries reject Keynes's thesis that governments should increase spending during downturns, and does the data (i.e. those countries' policies) in past downturns reflect that? If you can show one/some countries reject these ideas, that answers the question. $\endgroup$ – stevec Feb 12 at 12:56
  • $\begingroup$ @stevec but how do you define reject/accept Keynes thesis, and what exactly was Keynes thesis? I hold Keynes in great regard but even the most adherent Keynes fanboy has to concede that Keynes was never exactly clear on what sort of model/framework he was using and many of his proposals were Great Depression specific. E.g. modern Keynesian/New-Keynesian models do not show that in every recession government has to increase spending and that in regular recession monetary policy can be better. Also, its impossible to say if country rejects/approves of idea if you dont define it in measurable way $\endgroup$ – 1muflon1 Feb 12 at 13:08

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